Study: Board Compensation Increased in 2012

New York — Oct. 22

Mercer’s latest analysis of directors’ compensation shows median total direct compensation increased 3 percent in 2012, the lowest year-over-year change in years.

For the S&P 500, the median cash retainer increased from $65,000 in 2010 to $75,000 in 2012. The largest increases were at the 400 smaller companies ($60,000 to $75,000), while the median at the S&P 100 increased from $85,000 to $90,000.

From 2010 to 2012, the prevalence of companies paying meeting fees declined from 42 percent to 33 percent. Among the S&P 100, the prevalence is even lower (30 percent in 2012). For those companies that pay them, the fee has remained at $2,000 for the past three years.

As meeting fee use declines, companies are shifting variable pay into fixed retainers. The shift away from meeting fees underscores a change in the way boards work.

Equity compensation is paid at about 95 percent of the S&P 500 companies. About 80 percent determine the equity portion as a fixed value, rather than a fixed number of shares.

From 2011 to 2012, the value of equity compensation increased at 57 percent of companies and decreased at 39 percent. Median equity compensation rose from $120,000 in 2010 to $130,200 in 2011 and $135,000 in 2012.

The practice of granting stock options to directors continued to decrease in prevalence, from 26 percent in 2010 to 23 percent in 2011 and 19 percent in 2012. Yet the prevalence of full-value shares increased from 94 percent to 96 percent over the same period.

The majority of companies (80 percent) grant only full-value shares, while granting just stock options declined 6 percent in 2010, 5 percent in 2011 and 4 percent in 2012.

Source: Mercer